2006 PLP 1171 (PTD)

ALI SAIN DINO METLO, J.

Aggrieved by a demand-cum?-show-cause notice issued by the respondent No.3 on 14-2-2005 calling upon the petitioner to show cause why short-levied duty and taxes amounting to Rs. 1,274,199 along , with additional sales tax under section 34 of the Sales Tax Act, 1990 (to be calculated at the time of payment), should not be recovered from him, the petitioner has filed this petition for declaration to the effect that the demand was time-barred and illegal, and injunction to restrain the respondents from taking any coercive action to enforce the demand.

2. Briefly, the facts are that vide IGM No. 181 of 1996, dated 4-2-1996 the petitioner imported a consignment of teak wood from Myanmar. Owing to a confusion and dispute of classification prevailing in those days, the goods were provisionally assessed' and released under section 81 of the Customs Act, 1969, on 27-10-1996. The likely differential between the final determination and the provisional assessment of duty and taxes was initially secured by a bank guarantee but subsequently, on petitioner's request, the bank guarantee was replaced by his mere undertaking executed on 2-11-1996. It seems that the final assessment, which, in the terms of subsection (2) of section 81 ibid, was to be mandatorily made within one hundred and eighty days of the provisional assessment was never made and it was after the lapse of about nine (9) years that the above-said demand-cum-show-cause notice was issued without making final assessment. Indeed, final assessment could not be made after the period prescribed by subsection (2) ibid and, as provided by subsection (4) ibid, the provisional assessment was to be treated as final. Thus, Ms. Navin Merchant, learned counsel for the petitioner, was right in arguing that the customs were not competent to indirectly undertake the exercise of making final assessment after expiry of nine years. It appears that the customs, due to the gross inaction on their part, were themselves conscious of this legal position and it was, therefore, that they attempted to get support of some legal provision outside the tax statute. The impugned notice shows that it was issued under section 32(3) ibid read with section 72 of the Contract Act, 1872 for the recovery of so-called short-levied duty and taxes. In this regard, it may be observed that without making final assessment, there can be no question of any short levy. The goods were released on payment of duty and taxes on the basis of provisional assessment which became final on the expiry of the period prescribed under section 81(2) ibid, inasmuch as the final assessment was not made within the said period.

3. As regards section 72 of the Contract Act, 1872, it has no application to the facts of the present case. It will be worth to reproduce the section along with its illustrations:

"(72) Liability of person to whom money is paid or thing delivered by mistake or under coercion. A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it. Illustrations (a) A and B jointly owe 100 rupees to C. A alone pays the amount to C and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B. (b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive." No money was paid to the petitioner. The goods were released/ delivered to him on payment of duty and taxes provisionally assessed and not by any mistake or under any coercion.

4. The argument of Raja Muhammad Iqbal, learned counsel for respondents Nos. 2 and 3 that the periods of limitation prescribed by section 81(2) ibid for finalizing the assessment or section 32(3) ibid for initiating action for recovery of non-levied or short-levied duty and taxes would not come in the way of the customs, as according to him, the liability of the petitioner to pay the duty and taxes was contractual and not statutory, is nothing short of misconception on his part. The undertaking obtained from the petitioner in lieu of the bank guarantee did not impose upon him any independent liability to pay duty an taxes outside the tax statutes. It can, at the most, be treated as security for the payment of duty and taxes leviable under the statutes, though a very weak type of security as compared to the bank guarantee initially obtained from him. In view of the misconceived contention of the customs, it will be pertinent to observe here that any agreement for the payment of a tax not recoverable under the tax statute would be repugnant to Article 77 of the Constitution and thus void.

5. In view of the above, it is clear that after expiry of such a long period of nine years, neither the final assessment can be made under section 81 ibid nor any action for the recovery of so-called short-levied duty and taxes can be initiated under section 32(3) ibid or section 72 of the Contract Act, 1872, and, therefore, the impugned notice being misconceived and hopelessly time-barred is declared to be without lawful authority and the respondents are restrained from acting upon the same. These are the reasons for the short order passed and announced in the open Court on 7-3-2006. M.H./A-47/K?????????????????????????????????????????????????????????????????????????????????????? Petition allowed.